The Rise and Risks of Data Centres
The rapid advancement of Artificial Intelligence (AI), digital economies, and cloud computing have driven the increase in electricity demand due to data centre needs. Driven by huge renewable energy potential, extensive land and favourable geopolitical environment, ASEAN’s data centre market is projected to expand significantly, reaching an estimated USD $30.47 billion by 2030. Countries like Malaysia, Singapore, Indonesia, Thailand, and Vietnam have been at the forefront of this growth, with Malaysia alone obtaining approximately USD $23.4 billion worth of investment on data centres in 2023, a figure which is expected to double in the coming years1.
Data centres, especially those designed for AI model training, require substantial computational power, with the capability of ramping up or down within fractions of a second. The North American Electric Reliability Corporation (NERC) White Paper on the characteristics of emerging large loads exemplified that training AI models could surge the electricity consumption at a rapid rate of 190% of its rated capacity per second2. Large-scale hydropower plants, renowned for its fast-ramping rate, could only dispatch at a rate of 50% of its rated capacity per minute, leaving a supply gap for the fluctuating demand3. This mismatch indicates that current system operations may struggle to maintain stability under AI-driven load patterns. Looking at the imminent risks, the ASEAN Member States (AMS) must take actions to ensure grid operations could facilitate an uninterrupted and reliable low-carbon electricity supply for the data centres.
Catching Up with the Emergence of Data Centres
There are several ways to mitigate these risks, which include, but not limited to, domestic grid code (technical standards) enhancement and interconnections with neighbouring countries. Enhancements or updates on planning and operation codes are much needed to facilitate the integration of data centres in the country, especially for accommodating the fluctuating consumption from AI training. This is backed by the fact that most of AMS’ grid codes were released more than 5 years ago, while at the same time, the use of AI in businesses almost doubles the amount in the past 5 years4.
In addition, enhancing grid connectivity with neighbouring countries could also ease the risks of supply mismatch during peak electricity consumption through reserve sharing. Besides, cross-border interconnections could also enable optimal renewable resource allocation within the region, thus obtaining electricity at a relatively lower cost, particularly during excess of energy. However, the establishment of stringent technical standards for interconnections are necessary to ensure the cross-border electricity exchanges does not disrupt the grid stability and security of both domestic and connecting countries.
By the end of 2025, less than half of the AMS have explicitly stated the specific requirements for cross-border interconnectors, like frequency control, spinning reserve and security criterion, in their connection codes. The inclusion of interconnection requirements in the grid codes is crucial in ensuring seamless system integration with neighbouring countries, enabling greater energy security and accommodating higher VRE penetration for uninterrupted electricity supply for data centre facilities. Therefore, it is timely for the AMS to enhance their grid codes to enable better control over the uncertain characteristics of emerging large loads.
The Malaysian Approach to Mitigate the Risks
As one of the frontrunners on data centres investment in ASEAN, Malaysia (through Suruhanjaya Tenaga or ST) released the latest update to Peninsular Malaysia grid code in March 2025 to better prepare the imminent integration of data centres. Different from the 2020 document, the code separates the general information of each code with the detailed provisions into “main code” and “additional code”. This new arrangement enables ST to update the detailed standards in specific code without the need to revise the main code, allowing flexibility to adjust the requirements and procedures following the introduction of emergence large loads and variable renewable energy.
Although not specifically targeting data centre, the new grid code stipulated provisions that help ensure the safe and secure operation of the grid. ST added a specific provision on spinning reserve under the new operation code, which plays an integral role in providing quick response electricity supply, thus maintaining the frequency stability of the grid. The new code suggests the energy storage unit to provide Fast Frequency Response (FFR) to arrest frequency decline upon sudden change of load and/or generation. The provision also requires the energy storage unit to restore the grid frequency to its normal state within 2 seconds response time, thus creating the perfect opportunity to mitigate the operational risks of data centres integration.
What’s Next for ASEAN’s Grid Code?
Among the inclusion of specific requirements for fast frequency response in the Singaporean and Thai grid code, the recent release of Peninsular Malaysia Grid Code by Suruhanjaya Tenaga serves as a wake-up call for domestic grid code strengthening in the region. Through the emergence of data centres, it is the perfect time for the AMS to update their domestic grid codes, particularly on planning, operation, and emergency responses standards and procedures, to keep the security and reliability of grid operations in check. Specific requirements on spinning reserves, which define and require the provision of fast frequency responses, need to be put in place to mitigate the effect of sudden change of load and/or generation. This is highly relevant for ASEAN, as the regional VRE penetration is projected to reach 44% in power generation by 2045, according to the ASEAN Renewable Energy Long-term Roadmap (AREC Scenario).
As APG interconnection capacity grow to accommodate the higher integration of VRE, there is an imminent need of aligning technical standards between the member states for a more reliable and secure power exchange. Domestic grid code enhancements would serve as the foundational building blocks in the broader regional alignment process, emphasising the importance of building the AMS national grid readiness in supporting the APG initiative. Moreover, a guideline on the minimum technical standards would also support the AMS in determining the needs for enabling multilateral power trade (MPT). Backed by a strong regional cooperation and political commitment, both grid code enhancements and regional guideline establishment would pave the way towards substantial progress of MPT development under the APG.
